Good morning, Chairman Neufeld and committee members. Thank you for - - PDF document

Good morning, Chairman Neufeld and committee members. Thank you for the invitation to present to you on Yukon Energy’s business and the issues facing us. I will refer you to the slide presentation which I believe you have a copy of. I am now turning to slide 2.

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Note from ENEV Clerk: Due to cancellation of meeting, this organization is not rescheduled to appear but has asked that this presentation, prepared for their appearance, be considered their written submission to the committee.

I’ll address three general topics in my presentation:

• 1. Firstly. I’ll provide an overview of Yukon Energy, our asset profile, our recent

project history, and our current status.

• 2. Next, I’ll discuss the options that we are focusing on for new supplies of energy
• 3. And finally, I’ll touch on some of the challenges that we face.

After my formal remarks, I’ll be happy to take any questions that you have. Moving now to slide 3.

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Yukon Energy is one of two regulated utilities in the Yukon. We are responsible for the majority of electricity generation in the Territory, including 3 hydro facilities and a fleet of back‐up diesel generators. We also own and operate the majority of the electrical grid in the Territory. We distribute electricity to residential and commercial customers in a few of the grid‐connected communities outside of Whitehorse, including Dawson City, Mayo and Faro. We do not serve any remote

• ff‐grid communities.

ATCO Electric Yukon is the other regulated utility in the Yukon – they distribute power to residential and commercial customers here in Whitehorse, and they also provide power to a number of off‐grid communities, including Burwash Landing, Destruction Bay, Beaver Creek, Old Crow and Watson Lake. In 2014, Yukon Energy generated a total of 402 GWh of electricity, of which the vast majority – 99.6% – was renewable energy generated form our hydro facilities, and a small wind turbine that we also operate. In this respect, we differ significantly from the utilities in the Northwest Territories and Nunavut, who are far more reliant on diesel for base‐load generation. Our primary customers are ATCO Electric Yukon, who is our distributor as I just explained and who account for approximately 80% of our sales by volume; secondly the mining industry, which accounts for 10%, and then our own residential and commercial customers in the grid‐connected communities, who account for a further 10%.

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Moving on to slide 4. This chart shows how electricity rates in the Yukon compare to other jurisdictions in both Northern and Southern Canada. Monthly electricity costs for a typical residential customer consuming 1000 kWh per month are presented. You can see that the monthly costs for the Yukon, shown in the red bars, are comparable with those in Edmonton and St Johns, and actually lower than costs in major centers such as Toronto and Calgary. Our rates are also significantly lower than those in other Northern centers, such as Yellowknife and Iqaluit. This is a result of two advantages that we have compared to our northern counterparts:

• 1. Firstly, we benefit from lower cost hydro‐electricity, generated from assets that

were constructed some time ago.

• 2. Secondly, we have a transmission grid which allows us to serve the majority of

the Yukon population with cheaper grid‐connected electricity.

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Moving on to slide 5. Here we see Yukon Energy’s profile of hydoelectric and transmission assets. Our 3 hydro facilities have 92 MW total installed capacity, which includes: ‐ Whitehorse hydro on the Yukon River, with 40 MW installed capacity ‐ Our Aishihik facility, with 37 MW installed capacity, ‐ And finally our facility at Mayo, which has 15 MW installed capacity ‐ Of these three, Aishihik is the most important since it is our only storage reservoir which offers multi‐year storage. Our transmission grid, which you see in the red lines on the map, connect these hydro facilities with the towns of Whitehorse, Dawson City, Mayo, Keno City and

• Faro. ATCO electric also operate a few lines, shown in darker blue. Overall, we are

able to provide grid‐connected power to 93% of the Yukon population. Its important to note that our grid is not connected to either the BC or the Alaska grids, and as such we are an isolated grid, as is the electrical grid in the Northwest

• Territories. Operation of an isolated grid presents is own unique set of challenges.

We need to carefully balance supply and demand at all times, and we do not have the opportunity to import or export electricity to balance loads. In addition, being isolated means that we have to very carefully plan and time the construction of new generation assets.

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On to slide 6. Here we focus on Yukon Energy’s fleet of diesel back‐up generators. As I explained earlier, we typically generate over 99% of our electricity from hydro sources, relying

• n our diesel back‐up generators to meet peak demand during very cold periods.

Our diesel fleet also provides back‐up supply if our hydro facilities are down for maintenance, or we experience grid outages. We have a total of 39 MW of diesel backup, located principally here in Whitehorse, Dawson City, Mayo and in Faro. We are also constructing a new LNG‐fuelled back‐up generation plant here in Whitehorse, to replace a number of our older diesels that have reached end of life. I’ll discuss this new project in more detail later.

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Moving on to slide 7. Here we provide some additional insights into our electricity sales by sector, and our generation profile. The pie chart on the left shows the break‐down of our 2014 power sales by sector. The residential and commercial/institutional sectors together account for 90% of

• ur sales, while the industrial sector, which is essentially a single mine – Capstone

Mining’s Minto operation – accounts for 10%. The pie chart on the right shows the break‐down of our power generation by source – either: ‐ Renewable (hydro or a very small amount of wind), or ‐ Thermal; which is diesel generation You can see that the vast majority, 99.6% in 2014, is generated from renewables

• sources. We only use diesel for meeting supply gaps during very cold periods, and

during maintenance shut‐downs or outages of our grid.

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On to slide 8. This chart shows Yukon Energy’s total electricity generation over the past 10 years, 2004‐2014. You can see that there have been two distinct trends:

• 1. From 2004 through 2012 we saw a period of sustained growth in electricity

demand in the territory, fueled by a number of factors, including: ‐ Population growth, driven largely by activity in the mining sector and general economic growth in the Territory ‐ Colder winters, which contribute directly to increased power sales

• 2. From 2012‐2014 we have seen a reversal of this growth trend, with year‐on‐

year declines in electricity demand. Based on a careful analysis of available data, we believe that this decline has been driven by two key factors: ‐ Warmer than average weather ‐ A slow‐down in population growth, linked to a more general slow‐down in activity in the mining sector. It is worth noting that Yukon Energy did kick‐off a Demand Side Management program in 2014, aimed at encouraging energy efficient practices in the residential

• sector. However, given that this program is still new, we do not believe that the

reduction in power demand in 2014 is linked to this effects of this program.

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Moving to slide 9. Here we see a summary of the energy supply projects and transmission line projects that we have completed over the same time period. The energy supply projects are shown by yellow triangles; the transmission line projects by grey triangles at the top of the chart. Yukon Energy has added 17 MW of new generation capacity since 2011, including 10 MW of incremental hydro capacity at our Mayo facility, and 7 MW at Aishihik. We are also in the process of installing 8.8 MW of back‐up capacity here in

• Whitehorse. This is the Whitehorse LNG project which I’ll speak about on the next

slide. You can also see that we have completed one large transmission line project over this time period, namely the construction of a line from Carmacks to Stewart Crossing – this project, which was completed in two phases in 2008 and 2011, allowed us to connect our southern and northern grids, which prior to 2008 had

• perated as two independent grids. The transmission line also allowed us to

connect the Minto mine in 2008. You can also see on the upper right of the chart that we have kicked off design and permitting work on a new transmission line project from Stewart Crossing to Keno

• City. I’ll talk to this on the next slide.

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Looking now at slide 10. Yukon Energy has two major projects underway at the present time:

• 1. Firstly, on the left is our new LNG‐fueled back‐up power plant, under

construction here in Whitehorse. We are replacing back‐up diesel generators, which have reached end of life, with 8.8MW of LNG‐fueled engines. LNG offers significant advantages over diesel fuel in terms of lower fuel costs, and reduced air emissions and GHG emissions. We expect this $42.9M facility to be

• perational in late May 2015.
• 2. Secondly, on the right, we have just kicked off the engineering design and

permitting work on a replacement and upgrade of our existing transmission line between Stewart Crossing and Keno City. The existing line, which was constructed in the 1950’s, has reached end of life, and the Yukon Government has provided funding for us to begin this planning work for a replacement line. The goals of the project are firstly to improve the performance and reliability of this transmission line, and also to provide additional transmission capacity to support the development of resource industries in the area.

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Moving on to slide 12 – just a word on our Demand Side Management program. Energy efficiency, conservation and Demand Side Management are key elements of

• ur energy supply strategy. Indeed, by deferring new investments in generation

assets, energy efficiency programs are indeed the cheapest form of energy ‘supply’ that we have at our disposal. The Yukon Utilities Board approved Yukon Energy to move forward with a residential DSM program in 2014‐15, which included rebate programs for LED light bulbs and car block heaters. While the approved scope of this program is fairly modest, we have seen excellent uptake in these programs so far. In 2016 we plan to expand this program to the commercial/institutional sector, with a commercial LED lighting program as well as an LED streetlight program.

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I’d like to move next on slide 11 to review some of the options that Yukon Energy is exploring for new electricity supply. We are focusing on 4 options:

• 1. Firstly, the Government of Yukon, through Yukon Energy’s parent company

Yukon Development Corporation, is studying the development of what is referred to as a ‘Next Generation Hydro’ project, to meet the longer term energy needs of the Yukon 20‐50 years in the future. A down‐selection of 1‐2 candidate hydro sites is expected from this project by the end of 2014.

• 2. Secondly, Yukon Energy is completing wind resource monitoring and feasibility

assessment of wind farms at two potential sites in the Yukon. We are studying project sizes between 5‐20 MW installed capacity. The requirements to integrate intermittent renewables such as wind into our isolated grid, including back‐up requirements, will also be studied as part of this project.

• 3. Next, we are also assessing a smaller‐scale hydro project with a pump storage
• ption, with the objective of meeting our energy needs over the next 20 years.

Pump storage is a particularly attractive option in the Yukon, allowing us to save and utilize hydro resources which are currently wasted during the summer period.

• 4. Finally, the Government of Yukon is expected to release the final version of an

Independent Power Producers – or IPP – policy in 2015. With the launch of this policy, energy sources from IPPs are certainly a potential source of supply with Yukon Energy will consider as part of our future planning.

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Moving to the final slide, slide 13, I’d like to speak briefly about some of the challenges that Yukon Energy faces going forward.

• 1. The first is ageing infrastructure, which is an issued faced by utilities across

North America. A number of our assets, including both hydro equipment and transmission lines are over 50 years old, and reaching end of life. Significant investments will be required going forward to replace this hardware. Given our small rate base, these investments will likely have an impact on electrical rates, as additional assets are added to our rate base.

• 2. Financing of new capital projects is also a challenge, given our limited rate base,

as I just mentioned. A combination of direct government investment, together with conventional financing paid for by our rate payers, will likely be required for these new investments, in order to keep increases in electrical rates

• manageable. The Territorial Government debt cap also imposes a limit on the

amount of debt financing that we can raise to finance new asset investments.

• 3. Thirdly, securing social license for new development projects, in particular

those associated with fossil fuels, is a significant challenge in the Yukon. Many Yukon stakeholders are struggling to balance the needs for, and benefits of, cost effective energy against a desire for more costly renewables such as wind and solar.

• 4. Finally, we have seen recently the impact of warmer weather on the demand

for electricity in the Yukon. We continue to study the potential longer term impacts of climate change on other aspects of our electrical supply system, such as impacts on snowpack levels and changes in precipitation patterns.

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